Airdrops Explained

After their explosion in popularity and press in 2017,

most people know at least a little bit about cryptocurrencies and blockchain. However, there are many terms and phrases within the industry that many might not understand to the fullest extent. One of these terms is “airdrop”, which is one of the hottest things in the crypto industry. If you don’t quite understand what an airdrop is or why they’re important, don’t worry. This article will take an in-depth look at airdrops and explain all you need to know to understand them.

What is an Airdrop?

Before getting into the details of airdrops and why they take place, we need to first introduce you to the concept and idea. In the simplest form, an airdrop is free coins for certain individuals. They are essentially the process when a cryptocurrency enterprise distributes tokens to a user’s wallet, completely free of charge. Airdrops are commonly done by start-ups, but established companies or platforms can do them as well. The coins that are airdropped often are fairly low in value (at least initially), or are just used within the ecosystem of a platform, but definitely have the potential to grow. Plus, who is going to say no to free coins?

A recent example of an airdrop is the CLO (Calisto) airdrop for ETC (Ethereum Classic) owners. The airdrop took place at the 5,500,000th block of the ETC blockchain, which occurred about a month ago on March 5th 2018. This airdrop meant that each holder of ETC at the time the 5,500,000th block was processed, received an equal amount of CLO, for free. So if you had 15 ETC at the snapshot of the 5,500,000th block, you will automatically receive 15 CLO into your wallet, without any cost to you. In addition to this, some companies will airdrop their own tokens, while others will airdrop the token to holders of a more popular coin or token, to generate more buzz and get some eyes on their platform.

Types of Airdrops

In general, there are a few different kinds of airdrops and how they can come about. They can arise from forks, ICO purchases, or just random freebies from a company. Arguably the most well-known example of an airdrop is when Bitcoin Cash (BTC), the hard fork of Bitcoin, gave current Bitcoin holders the equal amount of Bitcoin Cash. So if you had one Bitcoin, you got one Bitcoin Cash for free. Currently, each BTC is trading at over $700 (but has reached much higher in the past), which is a pretty good deal to have gotten for free.

When it comes to finding out about different types of airdrops, a company will either announce it beforehand to generate buzz, or they will simply airdrop the coins as a surprise without any warning. If you are curious about upcoming airdrops and how to become involved, a good resource to follow is AirdropAlert. This website gives you times an information for past, previous and future airdrops and is a great and handy tool for keeping track of them. Of course, as we mentioned, sometimes airdrops will be done without warning, so not every airdrop that occurs will appear on the site.

Why Would Companies do an Airdrop?

You might be wondering why a company would simply give away tokens for free. Well, the decision is made for a number of different reasons. The first one related to marketing. An airdrop can be a way for a company or platform to spread awareness to interested investors and enthusiasts, without having to spend a lot of money on marketing.  There are so many cryptocurrencies in the space, so getting noticed and more awareness is always a positive.

And what better way to get people talking or interested in your platform than offering them something for free? It is a pretty sweet deal for investors as you don’t really have to do anything normally, other than hold a certain type of coin, to reap the rewards and benefits. It is a win-win for the cryptocurrency themselves (as airdrops often lead to a rise in coin prices and an increase in exposure) and for consumers (free coins are always a good thing).

Another reason for an airdrop is to reward loyal customers. Companies who have a large and active community, or who have been doing pretty well, might decide to reward their customers, users and token holders. This will not only excite the users, but also might lead them to continue using the platform and participating in the ecosystem. One last common reason for airdrops is for lead generation. Generating leads and gathering useful information is very important for marketing. In exchange for airdropping free coins, a company or platform might ask users to complete online forms that contain valuable information for targeted marketing purposes.

How to Participate in Airdrops

Participating in Airdrops is as simple as holding a certain token or coin in an Ethereum or Bitcoin wallet (depending on what the specific airdrop requires). Any wallet should do, though some might require a specific wallet such as a non-exchange ERC-20 compatible wallet. The wallet also needs to be active to ensure it is owned by a human and not one of 1000 randomly generated wallets with the sole purpose of getting more of the airdropped token.

Also, while airdrops are free coins, you still need to do your research and remain vigilant to ensure you don’t get scammed. This means you should never send any private keys, never send any money, and check official sources to make sure that the airdrop is legitimate and real. Safety is the most important thing, so ensure you are comfortable with any company or platform before investing in or using them. In conclusion, hopefully, this article has helped you understand everything about airdrops such as why they occur, why companies are okay with doing them, how to participate and more!

Article Produced By

Kale Havervold

https://www.allcrypto.com/guides/airdrops-explained/

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